from the what's-that-got-to-do-with-patents? dept

IBM's Chief Patent Counsel, Manny Schecter, has one of the most ridiculous defenses of the patent system you'll ever see over at Wired, entitled With All Due Respect: The Patent System's Not Broken. Having debated the patent system for years, I've noticed a pattern among patent system defenders who are big time patent lawyers. Their argument tends to amount to: see this wonderful thing? It exists because we have patents. Period. The fact that whatever it is they're pointing to probably has nothing to do with patents will never be acknowledged. Schecter's argument is a perfect example of this.

Why would a company spend billions of dollars to build a microprocessor-manufacturing plant employing thousands of skilled workers in the U.S., if it could only protect its technology by obtaining patents in other countries?

I love idiotic rhetorical speculative questions like this that assume it's impossible to answer in any way other than the one the questioner wants... especially when the actual evidence tells a completely different story. It turns out that we have examples of countries with weak or no patent systems -- and they did invest tons in manufacturing plants, employing thousands of skilled workers. As covered in Eric Schiff's research decades ago, both the Netherlands and Switzerland had extremely weak or non-existent patent systems at the time they industrialized -- and both built up industries that involved huge capital expenditure, without the ability to protect the patents at home. Similarly, research by David Levine and Michele Boldrin highlighted how the Italian pharmaceutical industry developed to be quite impressive at a time when pharmaceuticals could not be patented in that country.

The reason for this is not difficult to assess if you're not a patent lawyer. It's that companies don't sell "patents," they sell products. And you can sell products whether or not they're patented. If you build something people want, you can figure out a way to sell it -- even if someone copies you. In fact, what plenty of other research has shown is that (again, contrary to what many lawyers believe) copying market leaders is often a hell of a lot more difficult than people believe. And, of course, even if you have a direct copy, it doesn't mean you can really compete. The first mover advantage is important, but so is knowing how to market and sell products, and copiers often don't do a good job on that front. So, yes, there are plenty of reasons companies would spend a lot of money without patents. And we know that already because the evidence says so.

Why would a venture capital firm fund a social-networking service provider if the company could not obtain patents on its innovative software backbone, preventing others from easily copying it?

Uh, again, because they're not selling the patents, but the service. And plenty of smart VCs fund social networking companies without patents. Let's take a look at one of the most popular social networking sites out there today: Tumblr. The company has zero patents. Zero. And it raised money. From whom? From one of the most respected venture capitalists around: Fred Wilson, who has spoken out directly about how much harm patents do to innovation, and why it makes no sense to invest in a company because of their patents, as opposed to their actual product or service.

So we're now two for two on completely ignorant "rhetorical" questions from Schecter, showing that the true answers to his questions disprove his point. And that's just in the first paragraph. Let's jump forward a bit.

But here’s the thing: Patent disputes like this are a natural characteristic of a vigorously competitive industry.

And they’re nothing new: Similar skirmishes have historically occurred in areas as diverse as sewing machines, winged flight, agriculture, and telegraph technology. Each marked the emergence of incredible technological advances, and each generated similar outcries about the patent system.

So because we've made this mistake before, it's okay to make it again and again? What kind of logic is that? Seriously.

We are actually witnessing fewer patent suits per patent issued today than the historical average, according to economic historian Zorina Kahn. The rate of patent litigation was twice what it is today compared to some decades in the mid-19th century.

This is a completely moronic and meaningless measure. Why? Because the number of patents being granted today far, far, far exceeds the number granted in the past. The percentage of patents that are litigated over doesn't matter. We're talking about the impact of the lawsuits. The fact that the patent office grants a ridiculous number of patents today that never are used in litigation has no impact on that whatsoever. This is what's known as throwing out bullshit statistics when the actual data goes against you.

Economists also tell us that 75 percent of a company’s value is attributable to its intellectual property (IP) -- and that IP-intensive industries contribute $5 trillion per year to the U.S. economy. These industries account for about 35 percent of gross domestic product and 40 million jobs, including 28 percent of the jobs in the United States.

Where to start? First off, which economists? Second, having your value attributed to your "intellectual property" (loosely defined) is not the same thing as saying that it's because of intellectual property laws. This is a common and ridiculous mistake that many make -- assuming that because the things currently covered by IP laws are important, the laws themselves must be important. Ideas, content, innovation etc. all exist absent IP laws. This is something that patent lawyers seem to conveniently forget or ignore. Next, the $5 trillion number and the 40 million jobs claim -- well, that's equally bogus, as we've discussed before. It's based on the ridiculous and obviously faulty belief that these jobs and "contribution" to the economy are due to "IP laws" and not other economic activity such as people actually selling stuff. And those jobs? Yeah, anyone who claims that has lost all credibility, because, remember, it's actually mostly about trademark, and that means that 2.5 million of those jobs are actually people working at grocery stores. Sorry, dude, you don't get to claim the checkout bagger as a reason why we need stronger patent laws. But that's exactly what he does.

Six of the 10 companies globally with the highest software revenues are U.S. companies, including the top three. In other words: The success of the U.S. software industry correlates with its use of software patents to protect its innovations. If patent litigation caused by the U.S. patent system stifled innovation, U.S. software companies would not be the most successful in the world.

Well, let's start with the basic point that correlation does not equal causation. In fact, let's dig deeper and point out that in nearly every case, the patents came after the success. That is, these companies have used patents to restrict competition, not as a way to get big. Of course, Boldrin and Levine's research has shown that to be the case historically as well. Strong IP laws and enforcement tends to trail innovation, rather than the other way around. I don't know which "list" Schecter is using here, but we'll go with the software top 100 -- and it confirms that theory. Top of the list? Microsoft. The same Microsoft whose founder once said:

If people had understood how patents would be granted when most of today’s ideas were invented, and had taken out patents, the industry would be at a complete standstill today.

Not exactly the ringing endorsement Schecter believes it is. Yes, lots of big companies have patents, but that's because they need to have patents these days or they get sued by others who have patents. Schecter knows this because he lives this daily (sometimes in helping IBM sue other companies for innovating). Need we remind Schecter of the famous story of IBM showing up at Sun with a patent lawsuit, and after being told that Sun didn't infringe on any of the patents, telling Sun:

"OK," he said, "maybe you don't infringe these seven patents. But we have 10,000 U.S. patents. Do you really want us to go back to Armonk [IBM headquarters in New York] and find seven patents you do infringe? Or do you want to make this easy and just pay us $20 million?"

That's not innovation. That's extortion. And Schecter is defending it.

Ever since U.S. courts made it clear that copyright is unavailable to protect their ideas, developers have sought to protect inventions embodied in their software via patents. Denying patent protection for software will cause these developers to look for other ways to protect their IP investment — resulting in code that is less open, less accessible, and less interoperable.

Uh... copyright has never been about protecting "ideas," only expression, so I'm not sure what he's getting at here. Furthermore, part of the big problem with software patents today is how they're broadly claiming way too much. If I understand his argument here, it's that if we fix that, and stop them from using monopolies too broadly, they'll just try to lock up their software. Except we already know that fails in the marketplace in the long term. Over the long run, customers demand more open, accessible and interoperable solutions. Why do you think IBM bet so strongly on Linux backed up with a giant service business? Because it knew that there was money in providing services around open, accessible and interoperable systems. If a company is stupid enough to go in the other direction, it will fail in the marketplace. No problem there.

In the end, none of the arguments he makes even come close to making sense. At best, he argues some sort of bizarre correlation to make his point, but most of the time he's just pointing elsewhere and pretending it has something to do with patents. We could just as easily argue that patents have caused population growth in the US. I mean, look, the population has grown... and we have patents! And it would be just as meaningless as every single argument he makes.

IBM once had a practical monopoly.

So what Mike sez is just flat wrong: "If a company is stupid enough to go in the other direction, it will fail in the marketplace." -- No, IBM turned huge profits back in 60's through 80's. Actual facts, Mike, not opinion. IBM just ran afoul of (the now vanished) anti-trust, and that's the only reason Microsoft, Apple, Linux, or any other entity got ahead in the computer field: IBM was TOO BIG and everyone back then could see it, and it was cut down to manageable.

Anyhoo, most is Mike's usual wall of ad hom text. He can't seem to write without a lot of sheer ad hom; that's the style here, especially among his frothing fanboys -- and here they go in 3...2...1...

Quid pro quo

I wish we would review all US patents under the same standard that a Canadian court used when revoking the Viagra patent for lack of specifically disclosing what the invention was. Under that standard, the obfuscating, patent attorney language used in software patents would require their revocation.

Re: Re: IBM once had a practical monopoly.

however pointless and meaningless his arguments are, they are the ones that politicians believe and do their damnedest to uphold. sense and truth never even enters the equation, bullshit and money always do!

Re: Quid pro quo

Personally, I'd rather the patents they do award actually represent real inventions and not obvious combinations of existing tech. Yes, make sure the patents follow the law -- making a meaningless change to a molecule should not qualify as a new invention (as is done in the drug industry all the time); if a patent claims something, it had better either point to a real life example or clearly show how to implement it. ... and I have yet to see software that rises to the level of innovation that could legitimize granting it a patent.

Re:

Did he really just use sewing machines as a defense? That whole sewing machine patent mess slowed down adoption by 20 something years, kept prices artificially high, and encouraged knock-offs to be manufactured and sold in countries that didn't honor the patents, I wonder if we have any countries like that? Anyways, yes, there are plenty of examples where (sewing machines included, and part of the legal mess) people made inventions and did not patent them.

Re:

People have been coming up with ideas for CENTURIES, long before government-issued monopol... oh, excuse me, patents existed.

Longer than centuries. Millennia, even. But the interesting thing is that people have also been losing them for just as long. That was the problem that patents were invented to solve. It was never supposed to be about protection; that was just a means to an end.

The end was publication. You get patent protection by publishing the details of your invention to ensure that the knowledge does not die with you. The point of patents was to undermine the concept of the trade secret, which has been the biggest impediment to progress throughout human history.

Does that sound like a bold claim? Consider this: the Industrial Revolution, which began the process of bringing the world into the modern age, began in the 1750s. The chief fuel of industrialization was commodity steel.

Steel has been around for a long, long time, though. The earliest samples date back to the 14th century BC! But it was so valuable for military applications that smiths that stumbled upon it would keep it a closely guarded secret. Sometimes they would pass it on to an apprentice before they died, and sometimes they wouldn't, and the secrets of forging the miracle metal would be lost again.

Benjamin Huntsman developed a working steelmaking process in the 1740s, but he was English, and England had a patent system. And so the Industrial Revolution began.

In the 1830s, a Russian smith called Anosov developed a process that improved on Huntsman's work. But he never published the details, and the secret died with him. (Again.)

In the 1840s, Henry Bessemer came up with another improved steelmaking process that was a huge improvement over Huntsman's work. He patented it, and the new process allowed steel to be made much more quickly and more cheaply than before. Bessmerís industrial steelmaking process came out of patent production, and the technique was released to the public domain, in the 1870s. Karl Benz (as in Mercedes-Benz) created the Motorwagen, the first modern automobile, in 1885, built around an engine he developed in 1878.

So we see how the patent system overcame a problem that had literally held back human progress for over 3000 years! The system works well as designed; it's just that the design has been perverted over the years.

The problem is not patents themselves; it's that the concept has been twisted and abused. Much like copyright, which was originally created to rein in the abuses of publishers and is now used to facilitate them, patents are being used today to establish trade secrets instead of discouraging them. What we need is to restore patents to their original purpose. To do away with them entirely would be to return to the dark ages, when no one had any incentive to publish the details of their inventions and commit them to the public domain so they would not be lost.

A monopoly is a monopoly

In my opinion a patent is a monopoly. A patent is a monopoly. We are supposed to believe that society grants this monopoly in return for the benefit of society later. We've stated numerous times that monopolies are bad, competition is good. OK, then why do we insist on granting exceptions to this rule and slaughter our belief with state sanctioned monopolies? Oh! Because the state makes money from granting patents and there's a whole industry around this process. The lawyers love patents because they're complicated and require their expertise to get them. They also love it when other companies "violate" patents and they can litigate and earn more money.

I agree with Mike that patents are unnecessary for society and in fact do more harm than good. But I'll play along and cede to the idea that we could grant a limited 5 year protection on a patent and then promptly lift the protection after that limited period. Furthermore, a patent can only be enforced when the owner actually implements the idea. This way, we don't create a market for unrealized patents which enables strategic hoarding of unworthy patents to bully real innovators who are trying to realize a great idea.

Going to play devil's advocate...a bit

Most of us can agree that to some degree the patent system is not functioning as it was designed. i.e. Companies being able to patent things that have prior art and use, patents being issued for things like One Click Check Out which are beyond obvious. But I would like to throw in another idea about the use of patents.

Patents have the potential (not debating actual) to help a company recoup the money they spent in the development and creation of the product by preventing other companies from simply reverse engineering the invention and selling it without having to carry the initial cost of developing or inventing the product.

For example (just the first that came to mind) company A spends years and millions to research a new drug to do something good like treat toe nail fungus. Goes through all the expense of researching, paying guinea pigs to allow company A to experiment on them, Doctors to take notes on the side-effects, then all the money to pass through long process of getting the government to allow you to sell the new drug which might help you with your toe nail fungus if your liver can take it.

Company A spent say 100 million to do that.

Company B comes along and they figure out what the new drug uses by spending a couple months and some few dollars reverse engineering the compound and then they can sell the same drug for 50% cheaper because they have no R&D costs to recoup.

With a patent company A can sue company B and recoup the money from those lost sales.

Without the patent the only way for company A to compete is to lower their price to match B's.

Without a patent company A may still develop the new drug (thus creation does not stop) but they would also be less inclined to do so.

Patents do have a purpose. In business everything is risk and reward. The risk involved has to be backed by the possible reward. A patent helps lower the risk of the investment by allowing a company to protect that invention from another company simply copying it without bearing any of the cost in creating the product.

Really bad examples

Why would a company spend billions of dollars to build a microprocessor-manufacturing plant employing thousands of skilled workers in the U.S., if it could only protect its technology by obtaining patents in other countries?

This is a horrible example. Wouldn't the fact that such a plant costs billions to build tend to discourage copycats?

Re: Going to play devil's advocate...a bit

The flaw here is neccessity is the mother of invention, not patents. If company A is less inclined to spend a bunch of time and money researching a toenail fungus drug (whose side effects probably include melting your liver and kidneys), this is not neccessarily a problem because company A isn't the only inventor in the world, and if the need for toenail fungus medicine is pressing enough, someone will be inclined to work on making one.

As we see in the software industry (although technically covered by patents, they were ignored in order to build the industry) cooking industry, and basically any other industry where people have ideas and are not covered by patents.

Why any Patent Lawyer Would Say the Patent System's Not Broken

Re: Re:

The end was publication. You get patent protection by publishing the details of your invention to ensure that the knowledge does not die with you. The point of patents was to undermine the concept of the trade secret, which has been the biggest impediment to progress throughout human history.

1) Publication in the form of patents is absolutely and utterly useless because patent lawyers write them in such an incomprehensible way that even the original inventor sometimes cannot understand them. Publication in scientific journals happens quite independently of patents and provides a much better resource.

2) Trade secrets are alive and well - and are applied to anything that does not need to be disclosed and is sufficiently clever that it is unlikely that someone else will come up with it independently. Look for the Rolls-Royce patent on their new process for making fan blades. You won't find it.

The things that get patented are usually things that provide opportunities for extotrtion against independent inventors.

So we see how the patent system overcame a problem that had literally held back human progress for over 3000 years! The system works well as designed; it's just that the design has been perverted over the years.

No - the patent system is not a good idea that has somehow got subverted - it is a bad idea that always had negative results. Look at the history of the steam engine, photography, the telephone, anything related to Thomas Edison and the Wright brothers for much evidence of how the patent system encourages the worst aspects of human nature and causes nothing but harm to everyone involved.

Then look at the story of Frank Whittle and see a case where the patent was allowed to lapse and the invention flourished.

To claim that the explosive technological growth of the past three or four hundred years is somehow the consequence of the patent system is just ridiculous.

That growth is the consequence of two inventions that occurred somewhat before patents arrived, the printing press and the lens. The role of the printing press should be obvious. The lens enabled skilled craftsmen in their 50's to continue working a little longer, feeding an exponsnetial growth in the accuracy of machine manufacture. Then when the limits of human skill were reached the lens enabled optical methods to be used to improve accuracy further.

Re: Re:

Benjamin Huntsman developed a working steelmaking process in the 1740s, but he was English, and England had a patent system. And so the Industrial Revolution began.

Too bad you didn't check your facts - this from Wikipedia:

"the growing competition of imported French cutlery made from Huntsman's cast-steel alarmed the Sheffield cutlers, who, after trying to get the export of the steel prohibited by the British government, were compelled in self-defence to use it. Huntsman had not patented his process, and his secret was discovered by a Sheffield iron-founder called Walker. Walker, according to legend, entered Huntsman's works in the disguise of a starving beggar asking to sleep by a fire for the night.[3]"

Re: IBM once had a practical monopoly.

Yeah, I remember when the feds broke up IBM. Oh wait, no I don't, because that didn't happen.

IBM, DEC, and Honeywell had the market locked up for sure, and IBM was particularly nasty about lock-in, with proprietary interfaces, usurious contract terms and so forth. Without question, resentment against them helped encourage their fall from dominance.

However, antitrust action was far from the most important reason for their fall from dominance, let alone the only one. The primary reason they fell in influence was that they couldn't recognize or adapt to the fact that the marketplace was changing. They didn't think the PC was going to be the world-changer that it ended up being, pure and simple.

Re: A monopoly is a monopoly

In my opinion a patent is a monopoly.

That's a simple fact that nobody denies. It's the quid of the quid pro quo of patents.

But patents were never about benefitting society, were they?

They were. The benefit for society is the quo of that quid pro quo: society gets the details of and rights to use the invention after the patent expires. The whole purpose was to keep inventions from being a secret and thus not benefiting society much at all.

Re: Re:

You missed some minor details that alter the description of the history of steel, like knowledge of chemistry. Prior to the invention of writing an apprenticeship was the only way of passing on detailed knowledge. Further mush of this was 'magic' formulae and practice as they did not understand the physics and chemistry of steel.Diffrent ores gave different results when smelted by the same practice, so a smith trained in one area might have to do a fair bit of ecperimenting to get good result in a different area with different ores available.Benjamin Huntsman was a gifted experimenter, and DID NOT PATENT his steel making process, he kept as a trade secret.
Huntmans process started with wrought iron (a low carbon steel), cooked in carbon to become blister steel, and was dependent on the sources of the wrought iron.Henry Bessemer developed a process to convert cast iron (A very high carbon steel) into steel, and had the advantages of science, and knew much more about the chemistry of steel. A bessemer converter blows air through the steel to burn out the carbon than Huntsman ever did. The primary use of the bessemer converter was to produce mild steel, which was the equivalent of wrought iron, while Huntsman technique, remelting iron and steel. was and still is used to produce the high carbon and specialized tool steels. A James Nasmyth was working on the same ideas as Bessemer, but Bessemer solved the problems first. Bessemer acknowledged Nasmyth and his patents and offered him a share of the patent.
Huntsman and Bessemer are at the opposite end of the development and application of chemistry to industrial processes. Huntsman was working by experimentation and more dependent on picking sources of iron and steel, rather than knowing the basic chemistry of his raw materials, While chemistry and microscopy allowed Bessemer to select his ores and materials to give a known result.
It is more as Henry Ford said when the time is right a technology will emerge. Patents play a side role in profiteering, but both Bessener and Nasmyth were tackling the same problem, bulk manufacture of a wrought iron replacement, that is mild steel.
There is almost no relationship between Huntsman's work and that of Bessemer, they were tackling different problem, and Huntsman work remained relevant to the specialized steel market, cutlery, tool steels and springs. Bessemer was after the bulk production of a steel for structural purposes.

And it's partly because of 'patent-worthy' inventions such as that one; the RSA algorithm; the myriad compression algorithms, my own superfast D&D multi-dice probability algorithm ;-) etc. that I think your and Lemley's analysis and consequent position is misguided. If economics wishes to be considered (even) more respectable a science it could do worse than to start thinking about its patent system 'medicine' as ethical and evidentially informed medical scientists do about their interventions.

Re: Re: Re:

[blockquote]To claim that the explosive technological growth of the past three or four hundred years is somehow the consequence of the patent system is just ridiculous.[/blockquote]

I didn't claim that. I claimed that said growth is (in very large part, at least) the consequence of cheaply available commodity steel, which is a direct consequence of the patent system. (When you leave out an important step, you can make just about anything sound ridiculous.)

And your chronology doesn't match up. The printing press dates back to the mid 15th century, and the lens is ridiculously older than that; the oldest known artifact is from ancient Assyria, on par with the oldest known steel samples. And before anyone tries to argue, as I did with steel, that a new method for producing lenses became available right in time for the Industrial Revolution, that's not what happened; widespread lens crafting--specifically for the purpose of making corrective eyewear--predates the printing press by a couple centuries!

Since these elements had been in place for centuries without producing the Industrial Revolution, the reasonable question to ask is, "what changed?" And the answer is steel.

Re: Re: Re:

Not much, really. The ability to create and the ability to reverse engineer are always more or less on par with each other. While progress has given us a much more powerful toolkit for figuring things out, it's also given us much more complicated things to figure out, and in the end they sort of cancel each other out.

What a maroon

I tried to read the linked article, but I couldn't get past the first paragraph before my Stupid-O-Meter redlined because of this statement, which Masnik also quoted:

Why would a company spend billions of dollars to build a microprocessor-manufacturing plant employing thousands of skilled workers in the U.S., if it could only protect its technology by obtaining patents in other countries?

.

It went on overload because most of the real secrets around microprocessor development AREN'T PATENTED, because stuff you really don't want people to know about you never patent since your patent goes into a public database accessible by everyone and their uncle, including your competitors, and are instead kept in house as trade secrets.

Re: Re: Re: Re:

I didn't claim that. I claimed that said growth is (in very large part, at least) the consequence of cheaply available commodity steel, which is a direct consequence of the patent system. (When you leave out an important step, you can make just about anything sound ridiculous.)

Claiming that B follows from A and C follows from B is exactly the same as claiming that C follows from A.

Also I debunked you claim that commodity steel somehow follows from the patent system.

Huntsman didn't patent his process - so how is it in any way a consequence of patents?

Bessemer's process was independently invented elsewhere - and, if you actually read the history you will see that the progress of the project was hindered by patent battles.

And your chronology doesn't match up. The printing press dates back to the mid 15th century

Well it took time for the impact to be felt. The impact of the printing press fed through increasing literacy in the population - and that took time.

and the lens is ridiculously older than that; the oldest known artifact is from ancient Assyria, on par with the oldest known steel samples. And before anyone tries to argue, as I did with steel, that a new method for producing lenses became available right in time for the Industrial Revolution, that's not what happened; widespread lens crafting--specifically for the purpose of making corrective eyewear--predates the printing press by a couple centuries!

Maybe - but again - you have to take into account the quality of the lenses produced - and it was not until the turn of the 17th century that they were good enough for compound instruments to be produced. Then the effect has to work through into industrial progress - which takes time. You seem to think that these effects could happen overnight - but we are talking about 16th/17th/18th centuries here and things just didn't happen that quickly then.

Since these elements had been in place for centuries without producing the Industrial Revolution, the reasonable question to ask is, "what changed?" And the answer is steel.

Well if you accept (and I don't) that steel is the key then it has to be the HUntsman process (not patented) that is responsible - since Bessemer did not come along until 1855 - by which time the industrial revolution had been going strong for over half a century.

Re: Re: IBM once had a practical monopoly.

And why Microsoft was able to get so big so fast. Gates even says in his book that because IBM basically was the market, he let them use Windows for nothing in the beginning, giving them a further leg up, and then licensed it to everyone else producing IBM compatible machines.

Re: Re: Re: Re:

Absolutely. I was just saying this as I was playing with my 500-year-old mass spectrometer yesterday... Oh, wait, the mass spectrometer was invented in 1884, my bad.

Rationally, it was literacy which allowed science and invention to flourish, not patents. Without a place to publish, patents are pretty worthless. Which also brings up the reason why so many secrets were lost over the ages... you gotta write 'em down, and the books have to survive! Who knows what was in the Library of Alexandria when it burned down.